44% of UAE SMEs still unaware of automated VAT solutions
Majority of SMEs still maintain the books of accounts in Excel. - File photo
Dubai - It has been more than 17 months since the UAE introduced the value-added tax (VAT).
It has been more than 17 months since the UAE introduced the value added tax (VAT) but 44 per cent of small and medium-sized enterprises (SMEs) still perform their daily tasks manually for VAT records and filing returns as they are unaware of automated solutions, revealed a survey conducted by Tally Solution.
Vikas Panchal, business head for the Middle East at Tally Solutions, said that such a low level of awareness is due to a prevailing perception in the market that VAT-compliant business management software is for larger companies only.
"As a result, investment in such a software programme is relegated in the backseat, not knowing that giving it a priority is the key to ensuring correct VAT compliance. This is further compounded by limited understanding of VAT, resistant to change, and budget constraint," said Panchal.
SMEs should consider it as an investment rather than expenses because committing mistakes while filing VAT returns can result in fines and penalties, he added.
The survey covered over 200 small and medium-sized businesses in the UAE.
"An efficient, reliable and simple business management software not only takes care of the VAT compliance but will help in automating daily business operations allowing more time to the business owner to concentrate on the core business and increasing the productivity and efficiency significantly," he added.
SMEs currently represent 94 per cent of total number of companies in the UAE.
Anurag Chaturvedi, managing partner at Chartered House, said: "With the VAT being just a year and a half old in UAE, I understand that if 56 per cent of the SMEs are aware of the automated VAT solutions then it is a good sign, but I understand many SMEs in the UAE do not even have ERP solutions or any other accounting software for maintaining the books of accounts. They still maintain the books of accounts in Excel so it's difficult to bring a change in their mindset in such a short period of time."
He suggested that awareness should be spread through social media, and webinars.
Chaturvedi also said the cost of VAT solutions is not too high but that most of SMEs feel comfortable with desktop spreadsheets for filing their VAT returns as that they do not want to accept the fact that VAT automations will reduce pressure on existing staff, help in quick turnaround time during FTA audits and minimise or rather make an error-free VAT reporting.
"It's more to do with accepting the new culture that is required in tax economy, changing the mindset of the management and making them aware of the benefits attached to VAT automation. Many clients that we meet have a pre-conceived notion that for VAT automation they may need to change their existing ERP systems. Thus, many of them end up importing data from the system and then manually doing the consolidation, analysis, and corrections for the filing of VAT returns," Chaturved said.
He noted that an automated solution can save approximately 50 to 60 per cent of the time in VAT compliance and around 30 to 40 per cent in costs associated with tax personnel spends on VAT-related work.